In writing Building an Asset Management Team, Lou Cripps and I looked at the skills an effective Asset Management team requires – both technical and business understanding, good grasp of front-line experience, both system and structured thinking, a longer term perspective, emotional intelligence and communication skills, embracing uncertainty and the tools to think about risk, integrity, and enough leadership ability to get others to buy into a new way of working.
Good infrastructure Asset Management requires a tricky combination of attributes.
Lou came up with the image of the platypus, that is very rare and not to be found on most continents.
Instead of searching for an amphibious, duck-billed, otter-footed, egg-laying, venomous mammal that locates prey through electroreception, it’s easier to provide all the qualities we need through a complementary team.
But we still love platypuses. Watch out for more of them in the next ten days!
When I managed a small subsidiary company in the 1990s, I read a book by ex ICI chair John Harvey Jones on values. He said – and I am paraphrasing wildly – that any useful organisational value must have an opposite which would work in other circumstances, otherwise it’s so much mom-and-apple-pie stuff you can’t disagree with, but which does not motivate or drive very much, either.
When my team tried articulating our collective values, we all agreed on loyalty – which the marketing men said was not an appropriate marketing slogan, so I knew we were on to something. What could be (in other contexts) a useful opposite? Impartiality, for example. Loyalty was something we felt, and it also turned out to be something our clients could feel (and appreciate). Someone else could contribute impartiality.
As we face a puzzling current widespread refusal of North American infrastructure agencies to set clear SMART targets, we have wondered aloud if it’s because they don’t want anything they could fail at. I begin to wonder if it’s worse than this, a lack of clear purpose or value at all.
I think I have just spotted the worst yet: a transportation agency that’s adopted ‘We Make People’s Lives Better’. Their top leadership are very proud of it, since who doesn’t want to Make People’s Lives Better? The detail of what counts as better, which people, how we will do this – and what we do if one lot of people want something that would adversely affect another group of people? Well, don’t be negative, we can work that all out later. (And don’t even bring up all the critiques of naïve utilitarianism.)
Do we want a bus company to ‘make our lives better’, or do we just want them to concentrate on running an efficient and comfortable bus service?
For the moment, we asset managers can play the game of what, if anything, would not fit under this rhetoric. How could it even in theory rule out a bad option?
Yeah, it was a high-priced consultancy that facilitated this, but why does this even feel right to the executive, apart from being a meaningless feelgood statement?
Is it a triumph of the marketing men, or a complete dereliction of duty?
Every infrastructure project causes damage – to society, to the environment. We know this. A new road means loss of green space. It disrupts existing commerce and communities. Steel and cement are toxic to the environment. We accept this damage as a necessary cost of achieving a larger community good.
For too long, we have accepted this ‘larger community good’ to be the short term jobs that are created. But as shown in the last two posts, not only is this jobs gain illusory, it causes its own damaging distortions in the economy. Construction workers might gain, but other workers lose.
So if we are to support a new infrastructure project it must be because of the greater, ongoing benefits that the infrastructure will provide – after it has been constructed. For evidence based decision making, this is where we must seek our evidence.
How do we do this? What sort of evidence should we seek?
How often do you see arguments such as that spending, say, $100m will create Y,000 jobs? Rarely do we even question the logic, let alone the arithmetic. But we should do both. For if inserting $100m into the economy creates jobs – and it does! – then it must be equally true that extracting $100m reduces jobs. It follows that if the Government is running a balanced budget, then money into the economy through government expenditure is equal to money taken out of the economy through taxes to finance this and there is no net increase in jobs. The situation is worse if the Government is aiming at a budget surplus, for then more jobs are lost than are created.
The jobs created are nicely gathered together and visible for the project at hand, they are even amplified by media exposure, but what you don’t see are the jobs that are lost, for these are spread across the economy.
Let’s face it, to keep its budget under control it will either have to cut back on other expenditure or raise taxes and charges. (Think back to the last ‘stimulus’ bill, is that not what happened a year or so later? The government encouraged construction then later reduced funding affecting maintenance amongst other things.)
And as to the secondary round of expenditure – by which those receiving the first tranche of largesse are expected to go out and spend, thus creating more jobs, what about the secondary effects of the jobs that are lost?
Yes, we want to believe that we are making the world better by building infrastructure and creating jobs but are we in danger of letting wish fulfilment overcome logic?
Moreover, when we are losing jobs all over the country in order to put up a new infrastructure project, how can we be sure that we are gaining, in real community benefit terms, more than we are losing? Maybe we are not?
Sorry for long absence, I’m not dead, just been otherwise engaged. I am currently writing ‘The story of Asset Management: the first ten years’ (1984 – 1993) and as I read back through my old journals, it is easy to see why asset management has captivated me for so long and I thought some of the stories might captivate you, too. For example, try this:
1988 Scene: NSW Parliament House
In 1988 I attended a very heated debate on accrual accounting presented at the NSW Parliament House for elected members and selected others. It was memorable for a fight that almost broke out in the house. After much discussion on the pros and cons, one section of the audience was showing considerable disquiet. Eventually one of the group, a politician, stood up and angrily and loudly stated “If you reveal accrued liabilities we will be forced to do something about them”.
At this, the accounting professor on the platform, Bob Walker, replied neutrally “Accrual Accounting is simply an accounting system, it provides information, what you do with the information is up to you”. This was too much for the highly agitated politician who shouted “You’re just like Pontius Pilate, washing your hands of the whole affair”. Cheers broke out from that section of the audience.
What can we learn from this?
Now the academic was correct, if naive. It is true that accounting systems provide information that enable but do not enforce action. However awareness of information can be a propelling force to action, which the politician instinctively recognised. It is the old ‘ignorance is bliss’ argument, if no-one knows something needs to be done, then you cannot be blamed for not doing it. Once the facts are in the public domain, though, they may be far more difficult to ignore.
The information we develop as asset managers also presents imperatives to action – after all that is why we research, analyse and develop it. So we must be prepared for, and learn how to deal with, reactions like that of our angry politician and not go into the fray unaware. Yet how many times do we do precisely that?
The way in which our data or facts are presented is important, too. There may be no difference – in point of fact – between the glass that is half empty and the one that is half-full but the connotations are widely different. The truth is that facts can never ‘speak for themselves’. The language they speak and the message they give depends crucially on the way they are organised and presented. And this organisation and presentation is what politics is all about – influencing reactions. This is as true of internal, departmental politics as it is of larger scale national and international events.
We have developed a poor habit: decrying something as ‘just politics’ as if by doing so we can ignore it. But everything is politics! Better to learn how to play the game. That is, the game of presenting our information in such a way that the reaction we get is the one that we want.
We are currently working to justify the spend for improving our AM program. We would like to utilize other utility benchmarks for efficiency, productivity & other improvements from Asset Management implementation. We would use this to estimate what monetary value we can expect from improvements to operations. Thanks!
Always glad to hear from you, and we can send you the benchmark data we have.
However… looking to long-term, integrated, whole life cost-based Asset Management for short term operational savings is maybe not the place to look for benefits, unless you can already see inefficiencies in maintenance spending. Thinking more in terms of planned, proactive maintenance rather than depending on reactive maintenance may save a lot of trouble, but it is not guaranteed to save on budget. The benefits of being more proactive are more likely in terms of better customer service and managing risks so they do not cause you issues down the road.
Asset Management might be more realistically promoted as better customer service with the limited resources an organisation has; optimising effort so you target capital where it is really needed (and not wasted where it is not needed); better community, regulator and government trust in the capability to deliver what is required now and into the future.
That an organisation seeks immediate operational savings can be a symptom of pre-Asset Management thinking – thinking in terms of today’s budgets rather than service, risk & the longer term. The problem is that people may not see that poor customer performance, stakeholder mistrust and high risks actually do cost a lot of money, but they aren’t always accounted for. (Until, suddenly, in a crisis, it’s obvious how very much they cost…)
Happy to support in any way we can – I hope this might be useful!
Benefits of good Asset Management can include higher profits and share value, lower insurance premiums, getting out of a catastrophe intact – but does it ever save on next year’s budget?
Maybe through analysing the data and realising how inefficient you are – anyone actually done this?
And – while we’re asking – did anyone ever save money on implementing a work management IT system (as opposed to making it easier to organise maintenance tasks)?
Differences are good; understanding them helps us develop. So here, in a few words, I look at why – and how – the UK and Australian approaches to Asset Management differ, by considering how they started – with water.
NOTE: If you have early experience of these approaches please add your ideas in the comments section .
In the UK, asset management started with the privatisation of the water industry in 1989. The rationale for privatisation was to increase the quality of the service and the route to this was seen to be by directed capital expenditure. Ofwat, the regulator, set water prices high to enable the necessary investment and capital spending was the focus of Ofwat regulation. Water companies’ asset management plans set out the rationale for their capital spending, new and renewal, to meet the needs of the regulator. Thus their focus on spending capital to improve service.
In Australia, asset management also started with the water industry, but the impetus was very different. A long term modelling exercise for the water industry in 1983 made it clear that the cost of maintaining current water services would have to rise steeply, as assets aged and needed renewal. The same modelling was then extended to all other infrastructure holdings in the State making it clear that the combined renewal demands of all agencies would, within 15 years, completely overwhelm the state’s funding ability. So, in 1987 the SA Parliament set up an Asset Management sub-committee and the Government created an Asset Management taskforce to consider ways of reducing the renewal costs to a manageable level by a combination of changes to planning, management, maintenance and financial policies and practices.
Thus, whereas the focus of asset management in the UK with the water industry (and later other industries),was how to fundcapital renewal, the focus of asset management in South Australia, and then across Australia generally, was in how to avoid having to fund so much capital renewal.
The difference between the two approaches became clear in 1995 when the South Australian Government, in an endeavour to create international export markets for its water industry skills and services, offered a 15-year management contract to an international company that could expand the state’s water industry exports and at the same time reduce management costs. The Government made it clear that it was well satisfied with its current level of service and just wished to reduce cost, not increase standards. However when the UK water industry companies (and the French) were asked to demonstrate their asset management abilities, none could offer any evidence of actions taken to manage and reduce costs and, indeed, seemed somewhat perplexed by the question and focused only on what they had done by way of capital expenditure to raise services. During pre contract negotiations they consistently re-iterated their claims for capital enhancement and resisted discussion of cost reduction.
These two different approaches to asset management have continued. They both have strengths – and weaknesses. The Australian approach needs more attention to evaluating and prioritising capital projects (the main focus of Talking Infrastructure). The UK approach needs more attention to management cost reduction through better planning, maintenance and financial practices.
We now have a Publicationssection. Our first highlighted publication is Building an Asset Management Team by Ruth Wallsgrove and Louis Cripps. It’s available for Kindle for just a few dollars, and you can read it on eReaders, phones and tablets.
Building an Asset Management Team is a practical and lively guide for anyone who needs to do infrastructure asset management. It tackles who you need and why you need them.
Asset Management is increasingly important, legally mandated in many countries. ISO 55000 defines AM as the ‘coordinated’ activities of an organization to realize value from its assets. But longer term co-ordinated asset plans and strategies take real effort and skills. You can’t just think things better.
To succeed, you require good business understanding, broad technical knowledge of the assets, analytical skills, and great facilitation & communication…. Instead of searching for a platypus, it’s easier to build a complementary team.
Invaluable if you are developing a business case for setting up an AM team, considering where to locate the team in your structure, or how to attract and keep the right staff.
Proceeds of the sales of this book go to Talking Infrastructure. We are a not- for-profit association and we do not charge for membership, so if you would like to support us – and support yourselves – please consider buying this book, and recommending it to your colleagues and asset management associations. Find 5 excerpts from this book by putting ‘AM Teams’ in the search bar.
“The farther back you can look, the farther forward you are likely to see” Winston Churchill
Until around 1996 the terms ‘Asset Management’ and ‘Strategic Asset Management’ were practically synonymous. But with the increasing popularity of the term ‘Asset Management’ to describe a wide variety of activities, as described in Pt 1, there was a need for a term that could differentiate decision making from the doing so, in January 1999, when the Asset Management Quarterly became fortnightly and thus needed a name change, I chose “Strategic Asset Management”, popularly known as SAM.
This was to stress that Asset Management wasn’t maintenance and reliability, or capital acquisition, or Treasury asset sales or many of the other associated activities, but rather what later became known (in ISO 55,000) as ‘the alignment of asset activities with the goals and objecitves of the organisation’
The first issue of SAM, January 1999, explained the name change, and in doing so, focused on what differentiates asset management from what went before.
“The real key to being strategic is where you focus your attention. If you focus on what you are doing you are carrying out an operational task; if you focus on how you are doing it, seeking to ‘tweak it’ or do it better, then you are engaged in a tactical activity. Both of these are necessary and important. However, they are not strategic. The strategic task is the one that focuses on the outcome, or the purpose….What constitutes a ‘better’ outcome, however, is not for the maintenance manager to decide. A ‘better’ outcome is one that moves the agency in the direction of its strategic vision.
By way of illustration, take the construction of a new hospital. If the questions you are asking yourself are ‘what is the purpose of this new hospital; what needs are we providing for, should we be providing them or should they be provided by others, or should they not be provided at all; is a new hospital required or are there better means?’, then you are focussing on the outcomes – ie being strategic.
Asking yourself ‘should this construction be carried out as a ‘design-construct’, ‘build-own-operate’ or some other form of contract’ is asking tactical questions. If you ask ‘how do I ensure this construction comes in within time and budget and is of the right quality’ then you are engaged in an operational task.
Thus ‘Strategic’ is not the same as ‘Important’.ALL aspects of asset management are important.”
In January 2014, the first international standard in asset management, ISO 55,000 was launched, and with this, we came to the end of the beginning of Asset Management. No longer a novelty, a new-comer; Asset management arrived.